Interest-only payment
Monthly IO payment = loan balance × (annual rate / 100) / 12. No principal is paid during the IO period, so the loan balance stays constant throughout.
Finance
About Interest Only Calculator
Estimate monthly IO payment, post-IO payment, and cost delta for mortgage, HELOC, loan, line of credit, and construction draws.
About this calculator
What this does
Calculates interest-only (IO) monthly payments, the fully amortizing payment that replaces them after the IO period ends, and the cost delta between an IO path and a standard amortizing loan. Supports mortgages, HELOCs, lines of credit, personal loans, and construction draws with multi-draw funding schedules for real-world flexibility.
Who it is for
Homebuyers considering an interest-only mortgage, homeowners with a HELOC, developers modeling construction draws, and anyone evaluating whether an IO period makes sense for their cash flow versus total interest cost over the life of the loan.
How it works
During the IO period, the calculator charges monthly interest on the outstanding balance without reducing principal. After IO ends (if a total term is set), it computes a standard amortizing payment over the remaining months. For HELOCs and lines of credit, it uses the drawn balance rather than the full credit limit. Construction mode adds each draw to the running balance before charging interest, producing a month-by-month payment timeline chart.
Limitations
Does not model rate adjustments, prepayment penalties, taxes, insurance, or loan-specific fine print. The IO period assumes the rate stays constant throughout, which may not reflect adjustable-rate products. Construction draws assume perfect funding on schedule with no delays or cost overruns.
Formula
Amortizing payment
Standard payment = principal × (monthly rate × (1 + monthly rate)^months) / ((1 + monthly rate)^months − 1). This is the standard loan amortization formula used after the IO period ends.
Post-IO payment
After the IO period ends, the remaining term is amortized: remaining months = total term − IO months. The payment recalculates using the same principal over fewer remaining months, which means a higher payment than the IO payment.
Cost delta
Total IO path interest − total fully amortizing interest. A positive delta means IO costs more over the full term because principal was deferred; a negative delta (with early payoff) means IO saved money.
How it works
Step 1
Choose the loan type
Select mortgage, HELOC, line of credit, personal loan, or construction. Each type adjusts the input fields and how the calculator models the outstanding balance.
Step 2
Enter the loan amount and rate
Fill in the loan amount or drawn balance, annual interest rate, and number of interest-only months. For HELOCs and lines of credit, the credit limit is entered separately from the drawn balance.
Step 3
Set the total term
Enter a total term in months to see the post-IO payment and a cost comparison versus a fully amortizing loan. Without a total term, only the IO payment is shown without a repayment comparison.
Step 4
Add construction draws
For construction loans, add 2 to 5 draw rows with the month index and amount of each draw. The calculator adds each new draw to the running balance before computing that month's interest, mirroring how construction funding actually works.
Step 5
Review the results
Compare the IO payment, post-IO payment, total interest under each path, and the cost delta. The timeline chart shows how the balance and payments evolve month by month so you can see exactly when the payments change.
Step 6
Save and compare scenarios
Use the save button to keep a scenario for side-by-side comparison. This lets you test different loan amounts, rates, IO periods, or loan types in one view to identify the most cost-effective structure.
Reference ranges
IO period length
Common IO periods range from 3 to 10 years (36–120 months). Most mortgages offer 5–10 year IO terms; HELOCs often have a 10-year draw period followed by a repayment period.
Interest rate premium
IO loans typically carry a 0.25–0.75% higher rate than standard amortizing loans because the lender takes on more risk with deferred principal repayment. This premium varies by lender, loan type, and borrower profile.
Payment reduction
An IO payment is typically 20–40% lower than a fully amortizing payment for the same loan amount and rate, since no principal is being repaid each month. This frees up cash flow during the IO period.
Total interest impact
Over a full 30-year term, an IO path can cost 15–30% more total interest than amortizing from the start. However, IO can be cheaper if the loan is paid off early, the property is sold before the IO period ends, or the freed cash flow generates a higher return elsewhere.